Financial Question

[BRM21o]

Here's some research I've been doing and wanted to see if it would work...also, I'm still half drunk so I hope it makes sense...

Let's say you buy a 2-month Certificate of Deposit offered by Beal Bank with a minimum investment of $1,000. The interest rate they are offering is 4.15% APY and 4.08% interest rate. They offer 1 month CDs but the initial investment is $25,000. I also researched 1 and 3 month CD rate forecasts http://www.forecasts.org/interest-rate/1-month-cd-rate.htm which have predicted they steadily rise. They also have historical data for 1 month CDs that show low interest rates from 2001-2005 (1-3%) but pretty decent (4-10%) interest from 1965-present. I called a bank and they said if I put in 1,000, at the end of the month I would have around $40.80. Why is this too good to be true? If I did this every month the interest I would get would be around 49%. Why isn't everyone doing this?

THANKS!!

 

[The Chief]

Here's some research I've been doing and wanted to see if it would work...also, I'm still half drunk so I hope it makes sense...
Let's say you buy a 2-month Certificate of Deposit offered by Beal Bank with a minimum investment of $1,000. The interest rate they are offering is 4.15% APY and 4.08% interest rate. They offer 1 month CDs but the initial investment is $25,000. I also researched 1 and 3 month CD rate forecasts http://www.forecasts.org/interest-rate/1-month-cd-rate.htm which have predicted they steadily rise. They also have historical data for 1 month CDs that show low interest rates from 2001-2005 (1-3%) but pretty decent (4-10%) interest from 1965-present. I called a bank and they said if I put in 1,000, at the end of the month I would have around $40.80. Why is this too good to be true? If I did this every month the interest I would get would be around 49%. Why isn't everyone doing this?THANKS!!

Obviously the bank "spokesman" forgot to divide by 12. Gross return on the $1K for a month at 4.08 percent would be about $3.40. Further, assuming your marginal tax rate is 20% you would net about $2.72 for the month.

Navy Federal is offering an 18 month CD at 6.25%. There is a minimum, not sure what. www.navyfcu.org. USAA also has some competive offerings.

 

[openbah]

Navy Federal is offering their 6.25% with a 18-month, $15,000 minimum.

USAA offers (with $1K minimum):
3 Month, 4.00%
6 Month, 4.60%
7 Month, 4.66%
9 Month, 4.76%
12 Month, 5.20%
15 Month, 5.23%
18 Month, 5.29%

I have a couple CDs with ING. Their current rates (no minimum):
6 Month, 5.00%
9 Month, 5.05%
12 Month, 5.20%
18 Month, 5.20%

 

[Machine]

Or you could just get a savings account with Presidential which is offering 5.12% APY on balances up to $35,000 with no minimum balance, and not have to worry about locking up your liquid assets.

http://www.presidential.com/

 

[openbah]

Or you could just get a savings account with Presidential which is offering 5.12% APY on balances up to $35,000 with no minimum balance, and not have to worry about locking up your liquid assets.

Actually, there is a $5000 minimum with that account, check out the fine print:
http://www.presidential.com/PremierSavings.htm

Also, it is misleading to say the Presidential account won't lock up your assets, because neither will the others, they will only penalize you for early withdrawl.

 

[Machine]

Actually, there is a $5000 minimum with that account, check out the fine print:
http://www.presidential.com/PremierSavings.htm

You're right (sorta). You do need to open the account with $5000, but there is no minimum balance after you open the account to avoid fees (meaning you could keep your balance below $5000 after your initial deposit).

Also, it is misleading to say the Presidential account won't lock up your assets, because neither will the others, they will only penalize you for early withdrawl.

Ok. Semantics. But what I meant was that there would be no fee if you needed to withdraw your money.